The Hidden Agenda of Amazon’s New Phone

Amazon’s long-awaited smartphone is finally here, and if you believe Amazon founder and CEO Jeff Bezos, the Fire Phone will solve all our photo-taking, outdoor-reading, and home-shopping needs.

But the bigger picture is that this new device may also help Amazon better compete with tech giants like Apple and Google in areas that extend well beyond the phone in your hand.

Rumors that Amazon has been working on a smartphone have been circulating for years. Back in 2011, Citigroup analyzed Amazon’s supply chain and predicted in a memo that the e-commerce giant might be working on a phone. In September 2012, The Verge published a story saying that the new Amazon phone might be released the very next day. And then, last year, The Wall Street Journal broke the story that Amazon’s smartphone would include retina-tracking technology that brings 3D-like imaging to the screen.

The bigger picture is that this new device may also help Amazon better compete with tech giants like Apple and Google in areas that extend well beyond the phone in your hand.

On stage at the Fire Phone’s much-hyped coming out event in Seattle Wednesday, Bezos confirmed many of those rumors and more. Yes, there will be a phone. Yes, it’s being sold exclusively through AT&T. Yes, it includes four front-facing cameras in an effort to give images depth and make games more addictive. Yes, it comes with free Amazon Prime, and yes, it makes it incredibly easy–almost too easy–to buy whatever you want when you want it. And yet, now that Amazon’s highly anticipated creation is here, what matters is not just what the Fire Phone can do (for more on that, check out our story from yesterday), but what it lets Amazon do.

There was a time, not long ago, when Amazon was for shopping, Google was for searching and advertising, Apple was for sleekly designed gadgets with even sleeker user interfaces, and Facebook was for keeping in touch with friends. But the bigger these businesses get, the more pressure they face to grow even larger, and the more they covet each other’s customers. Being the best at what they do is no longer good enough. Now, these giants want to be the best at what the other guys are doing too. They’re all turning into each other. Google is becoming Facebook–and vice versa. Apple is becoming Google–and vice versa. And, naturally, Amazon is following suit. Amazon

Yes, with the Fire Phone, Amazon is making an aggressive move into Apple and Google’s territory in the smartphone market. On stage, Bezos directly compared the quality of the Fire Phone camera to the iPhone 5S and the Samsung Galaxy S5. He showed off the fact that the Fire Phone is better for outdoor viewing than the alternatives, and he explained that it makes reading on the phone easier, something that Amazon has an understandable interest in with its trove of digital books, because users need only tilt the phone to scroll through the pages.

But perhaps more importantly, Amazon is entering a competition for Google’s ad dollars. The bulk of Google’s business is still advertising. Even as it works on so-called “moonshot” projects like driverless cars and Google Glass, Google lives by the promise that it has the best service for tracking potential customers and showing them an ad. But Amazon just released a feature on its smartphone called Firefly, which, if truly successful, could bypass Google altogether.

Firefly is essentially search in a button. It lets anyone take a photo of an object and immediately see its listing on Amazon. Firefly can also recognize things it hears, like music on the radio. Of course, the tool lets you buy stuff on Amazon, but third-party apps can also integrate with Firefly. So, for example, if you’re listening to a song on the radio, Firefly might give you the option to buy the album from Amazon, buy a concert ticket on Stubhub, create an IHeartRadio playlist of that artist, and in time, much more. Firefly completely bypasses the need to Google that song to find out who the artist is to buy a ticket on Stubhub or set up a playlist on another app. Amazon can woo Google’s advertisers without advertising.

In a way, this answers what Google has done in recent years. Just as Amazon is encroaching upon Google’s market share, Google is encroaching on Amazon’s with a recent push into online shopping. Google no longer wants to simply show consumers an ad, only to have them buy that item somewhere else. It wants to make its advertising proposition even more potent by proving to advertisers that people are actually buying what they’re seeing. That’s one reason why Google launched its Trusted Stores program a few years back, which awards badges to approved online stores in an effort to engender trust among consumers. And now it’s partnering with retailers to, in Amazon-like fashion, actually deliver stuff to your door.

Meanwhile, according to reports, Apple is poised to push even further into the shopping world, exploring its own online payments service. Google is already in payments world, thanks to Google Wallet, but, with its trove of 800 million credit cards on file with iTunes, Apple has good reason to believe that it too could make payments more seamless for consumers and woo many other businesses to its platform. Amazon has a similarly large stash of cards. Might it be next?

But this battle of the tech giants extends well beyond shopping, search, and advertising. Amazon and Google already offer tablets as well. And so does Apple. Amazon and Google are also moving into the living room with the Fire TV and Chromecast, hoping to sell not only videos and music but games. This puts them up against not only each other, but, yes, Apple, with its Apple TV settop.

The goal for all of these companies, with all of these products and services, is not to relinquish an inch of market share to anyone else.

The goal for all of these companies, with all of these products and services, is not to relinquish an inch of market share to anyone else. As much as they can, they want to own the entire supply chain, from the time a product is advertised, to where and how it’s purchased, to the delivery of that product. And if they can own the device that’s to do all of those other things, so much the better. On Wednesday, for instance, Bezos told the audience how “tens of millions” of Kindle Fire and Kindle owners have driven the explosive grown of Amazon Prime, Amazon’s membership service. No doubt Bezos hopes the Fire Phone will do the same.

The fact that these companies are battling each other is great news FOR the rest of us. Competition forces each company to at least try to come up with something better than the next. And yet, Facebook’s own failed smartphone is a perfect example of what can happen when even the strongest companies stray too far from their expertise. With its phone, Facebook was telling consumers that they wanted to use Facebook first for everything, and as the company soon found out, that wasn’t entirely true.

With the Fire Phone, Amazon may escape that fate, because it already knows that people want to use Amazon for shopping, for streaming video, for reading books, for shipping, and more. In many ways, a phone is the encapsulation of everything Amazon has ever done, all wrapped up in a 4.7 inch package.